FS Investment III enters into $300 million debt financing via Goldman

By Toni Weeks

San Luis Obispo, Calif., June 24 – FS Investment Corp. III entered into a $300 million debt financing arrangement with Goldman Sachs Bank USA on June 18 through two wholly owned special-purpose financing subsidiaries, according to an 8-K filing with the Securities and Exchange Commission.

Proceeds will fund investments and other general corporate purposes.

The company elected to structure the financing via the special-purpose vehicles to, among other things, obtain the financing at lower costs than it would otherwise, the filing noted.

Pursuant to the arrangement, assets in the company’s portfolio may be sold and/or contributed to Germantown Funding LLC, a newly formed special-purpose vehicle of the company. These assets will secure the obligations of Germantown under floating-rate notes that are to be issued from time to time by Germantown to Society Hill Funding LLC, another newly formed special-purpose financing subsidiary. Citibank, NA is the trustee for the notes. The aggregate principal amount of notes that may be issued by Germantown Funding is $500 million. Society Hill Funding will purchase the notes at par.

Interest on the notes will accrue at Libor plus 400 basis points. Principal and unpaid interest will be due and payable on the maturity date, Oct. 15, 2027.

Society Hill, in turn, has entered into a repurchase transaction with Goldman. Pursuant to the Goldman facility, on one of more occasions beginning July 15, 2015 and ending 10 business days before July 15, 2019, Goldman Sachs will purchase notes held by Society Hill at a purchase price equal to 60% of the principal amount of notes to be purchased. The maximum principal amount of notes is $500 million. The aggregate maximum amount payable to Society Hill under the Goldman facility will not exceed $300 million.

Society Hill Funding will repurchase the notes sold to Goldman no later than July 15, 2019 at the same price that Goldman purchased the notes, plus fees. Financing fees will accrue until Nov. 15 on the aggregate purchase price paid by Goldman for the notes. Thereafter, financing fees will accrue on $300 million unless and until the outstanding amount is reduced in accordance with the terms of the Goldman facility. The financing fee under the Goldman facility is equal to Libor plus up to 250 basis points.

According to the filing, if Society Hill is required to post additional cash collateral on any underlying assets, it intends to borrow funds from a new $300 million revolving credit agreement provided by FS Investment III. Borrowings under the credit agreement will accrue interest at one-month Libor plus 75 bps.

Philadelphia-based FSIC III is an externally managed, non-diversified, closed-end management investment company that aims to generate current income and, to a lesser extent, long-term capital appreciation by investing primarily in debt investments of a broad array of private U.S. companies.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.